Malallis & Malallis

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Federal Circuit and Family Court of Australia

(DIVISION 1)

Malallis & Malallis [2022] FedCFamC1F 619

File number(s): DGC 2090 of 2020
Judgment of: MCNAB J
Date of judgment: 25 August 2022
Catchwords: FAMILY LAW – PROPERTY – Application in a Proceeding – Application for joinder – Entitlement under a Discretionary trust – de facto ownership and control – no sufficient identification of the jurisdictional basis for joinder – leave granted to file a further amended application and statement of claim  
Legislation:

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 3.01, 3.03, 5.05

Family Law Act 1975 (Cth) s 90AA, 90AC, 90AE

Cases cited:

AC and Ors & VC and Anor [2013] FamCAFC 60

B Pty Ltd v K [2008] FamCAFC 113

Division: Division 1 First Instance
Date of hearing: 11 August 2022
Place: Melbourne
Number of paragraphs: 34
Counsel for the Applicant Ms S Fisken
Solicitor for the Applicant Lander and Rogers
Counsel for the Respondent Mr L Wraith
Solicitor for the Applicant  Mr Malallis  
Counsel for the Proposed Third Respondents Ms L Frederico

ORDERS

DGC 2090 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS MALALLIS
Applicant
AND:

MR MALALLIS
Respondent

order made by:

MCNAB J

DATE OF ORDER:

25 AUGUST 2022

THE COURT ORDERS THAT:

1.The applicant have leave to file and serve a further amended application together with a proposed statement of claim, and any further supporting affidavit by 8 September 2022.

2.The respondent and proposed respondents file a response and any supporting affidavits by 22 September 2022.

3.The application be listed for hearing on 6 October 2022 at 10.00am.

4.The costs of and incidental to this application be reserved.

Note:   The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Malallis & Malallis has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

McNab J:

  1. The applicant wife seeks leave through her Application in a Proceeding (“the application”) filed 10 June 2022 to join to the proceeding pursuant to r 3.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”) the following individuals and entities (“the proposed third parties”):

    (1)Ms B, the husband’s mother;

    (2)D Pty Ltd ACN…;

    (3)C Pty Ltd ACN… (the trustee of the Malallis family trust);

    (4)E Pty Ltd ACN…; and

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Details
Case
[2022] FedCFamC1F 619
Decision Date

CaseChat Overview and Summary

In the matter of Malallis & Malallis, the wife sought a final property settlement, including the joinder of third parties who she contended held assets in which the husband had a 50% interest. The husband and proposed third parties opposed the application to join these parties, arguing that the wife had failed to identify a jurisdictional basis for the orders sought against them and had not disclosed a cause of action or supporting evidence. The wife relied on her affidavit and submissions, asserting that the proposed third parties were necessary to affect the final orders sought, including capital distributions and property settlements. The court had to determine whether the proposed third parties were necessary parties within the meaning of r 3.01 of the Rules, which states that a person whose rights may be directly affected by an issue in a proceeding, and whose participation as a party is necessary for the court to determine all issues in dispute in the proceeding, must be included as a party to the proceeding.

The court considered the arguments and submissions from both the husband and the proposed third parties, who opposed the joinder on the grounds that the wife had not identified a jurisdictional basis for the orders sought, had not disclosed a cause of action, had failed to particularise a claim, and that the joinder of these third parties was likely to jeopardise the hearing date. The court also noted the wife's objection to the husband and proposed third parties' submissions, arguing that they should be disregarded because they did not comply with the Rules. However, the court proceeded to deal with the matter on the basis that the submissions filed by the husband and proposed third parties were, in effect, their responses.

The court found that the wife had not identified a jurisdictional basis for the orders sought against the proposed third parties and had not disclosed a cause of action or supporting evidence to support a claim that necessitated their joinder. The court held that the wife had failed to particularise a claim to enable the entities to respond, and that the joinder of these third parties was likely to jeopardise the hearing date. Consequently, the court refused leave to join the proposed third parties.

No orders were made as the application was dismissed. The wife's application for joinder of third parties was refused, and the matter proceeded to final hearing on 24 October 2022 for five days without the proposed third parties being joined as parties.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The wife also seeks inter alia that:That within 60 days of the date of these orders, the husband and the second respondent in their capacities as directors of [C Pty Ltd], the trustee of the [Malallis Family Trust], cause a capital distribution to be made to the wife of an amount to be particularised. Procedural Background to the application The wife commenced proceedings on 25 June 2020. On 11 August 2020, orders were made for an interim property settlement by consent. On 6 May 2022 at a mention to set this matter down for final hearing (which to be conducted commencing 24 October 2022), orders were made granting the wife leave to file an application for joinder of third parties, with the application to be filed on or before 27 May 2022. The application was filed 10 June 2022. I pause here to note that the wife has objected to the court having regard to the submissions filed on behalf of the husband and the proposed third parties on the basis that pursuant to r 5.05 of the Rules: (1) A respondent to an Application in a Proceeding who seeks to oppose the application, or seeks different orders, must file and serve a Response to an Application in a Proceeding.(2) A respondent who files and serves a Response to an Application in a Proceeding must, at the same time, file and serve an affidavit stating the facts relied on in support of the Response.Note: A Response to an Application in a Proceeding must be filed and served within 28 days after service of the application to which it relates (see subrule 2.18(2)). In circumstances where the applicant was late filing her application, I have proceeded to deal with the matter on the basis that the submissions filed by the husband and the proposed third parties are, in effect, their responses. Those submissions seek orders for the court to strike out or dismiss the application on the basis that there is no proper statement of any jurisdictional foundation for the claims against the proposed third parties. These proceedings relate to final property orders sought by the wife, including such property as the wife contends the husband has a de facto control over and a 50% interest in, being the assets held and controlled by the proposed third parties referred to in her application and set out above. She seeks these parties be joined as joinder is necessary to affect the orders she seeks on a final basis. This matter is listed for final hearing on 24 October 2022 for five days. The Wife’s Evidence The applicant relies on an affidavit in support of her application affirmed 10 June 2022, together with written submissions which contained annexures, which were filed on the date of the hearing of the application. The wife sets out by way of background that she is 45 years of age and the primary carer of the two children of the marriage, X aged 12 and Y age 9. She is a homemaker and she works on a casual basis in retail. The husband is 47 years of age and is the executive director of G Group. The mother deposes that G Company was a business set up by the husband's parents Mr H and Ms B. The wife deposes that the husband has worked at G Company for his entire adult career. He is responsible for the day-to-day operations of the business, long-term marketing, business strategy, new product development and all other aspects in the management of the business.

Evidence

Evidence Before The Court

This matter is listed for final hearing on 24 October 2022 for five days. The Wife’s Evidence The applicant relies on an affidavit in support of her application affirmed 10 June 2022, together with written submissions which contained annexures, which were filed on the date of the hearing of the application. The wife sets out by way of background that she is 45 years of age and the primary carer of the two children of the marriage, X aged 12 and Y age 9. She is a homemaker and she works on a casual basis in retail. The husband is 47 years of age and is the executive director of G Group. The mother deposes that G Company was a business set up by the husband's parents Mr H and Ms B. The wife deposes that the husband has worked at G Company for his entire adult career. He is responsible for the day-to-day operations of the business, long-term marketing, business strategy, new product development and all other aspects in the management of the business. After his father died, the husband stepped into the role of Executive Director and it is asserted that he continues in this role. He is the only child of Mr H and Ms B. The business comprising G Company was valued as at 25 January 2022 by a single valuer at $52,007,000. The wife states that each of the companies sought to be joined form part of the corporate structure which owns the assets of the business, G Company. Further, she said that E Pty Ltd and the E Trust hold adjacent properties in Suburb J in Victoria, with the husband and Ms B being the joint directors and equal shareholders of E Pty Ltd, which is a trustee of the E Trust. The husband and the paternal grandmother are listed as joint proprietors on the title of the properties. One of the properties was purchased by the husband and his parents in 2010, and the other purchased in 2016. The wife asserts that one of the properties was used as a holiday house for the whole family prior to the separation. She asserts that this asset had no business use and was not an income generating investment. The wife also refers to the husband's father's will, which was dated late 2012 (the paternal grandfather having passed away in late 2012). Paragraph 5.1 of the will provides “I nominate and appoint such of [Ms B and Mr Malallis] who survive me to replace me in any controlling position in my trusts.” In that document “My Trust” is defined as the "[Malallis Family Trust, the F Trust, E Trust] and any other trust in which I have a controlling position.” By her affidavit at [12] – [19] she says that both she and the husband received distributions from the Malallis Family Trust which are shown in the financial accounts, but she is not sure whether those distributions have actually been paid out. She states that in the financial year ending 30 June 2018, a distribution was declared in the tax return of the trust to her of $695,683 and to the husband of $695,682. The wife also refers to a distribution declared in the tax return of the trust for the year ending 30 June 2017 of $156,967 to her and $937,618 to K Pty Ltd, a company wholly owned by the husband and of which he is the sole director. She also refers to a distribution declared in the tax return of the trust to the husband of $453,250 for the year ending 30 June 2016. The wife deposes that she does not know to what use those funds were put or whether there were further distributions in the previous years, as she says that those financial documents relating to any earlier payments have not been disclosed to her.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Notwithstanding that this affidavit was served in June 2022, the respondent husband has not responded to the matters raised by the wife’s affidavit relating to his income, expenses and his statement in a loan application that he had income of $2,493,001.Consideration The husband correctly submits that the issue to be resolved is whether the proposed third parties are persons whose rights may be directly affected by an issue in a proceeding, and whose participation as a party is necessary to determine all issues in dispute in the proceeding, within the meaning of r 3.01 of the Rules. Rule 3.01 provides:Necessary partiesA person whose rights may be directly affected by an issue in a proceeding, and whose participation as a party is necessary for the court to determine all issues in dispute in the proceeding, must be included as a party to the proceeding. Rule 3.03 provides the procedure for adding a new party:Adding a party(1) A party to a proceeding may include any person as a party by:(a) naming the person as a party in the application, response or reply; and(b) serving on the person a copy of the application, response or reply and all other relevant documents filed in the proceeding.(2) A party may add another party after a proceeding has started by amending the application or response to add the name of the party.(3) A party who relies on subrule (2) must:(a) file an affidavit setting out the facts relied on to support the addition of the new party, including a statement of the new party's relationship (if any) to the other parties; and(b) serve on the new party:(i) a copy of the application, amended application, response or amended response; and(ii) the affidavit referred to in paragraph (a); and(iii) any other relevant document filed in the proceeding; and(c) serve on the other parties:(i) a copy of the application, amended application, response or amended response; and(ii) the affidavit referred to in paragraph (a).(4) A party may only add another party after the first court date with the leave of the court.(5) A party who relies on subrule (4) must:(a) file:(i) an Application in a Proceeding; and(ii) an affidavit setting out the facts relied on to support the addition of the proposed new party, including a statement of the proposed new party's relationship (if any) to the other parties; and(b) serve on the proposed new party:(i) a copy of the Application in a Proceeding; and(ii) the affidavit referred to in subparagraph (a)(ii); and(iii) any other relevant document filed in the proceeding; and(c) serve on the other parties:(i) a copy of the Application in a Proceeding; and(ii) the affidavit referred to in subparagraph (a)(ii). Both the husband and the proposed third parties oppose leave been granted to join the proposed third parties on the basis that:(1)The wife has not identified a jurisdictional basis for the orders sought against Ms Malallis in her capacity as a director of C Pty Ltd;(2)The wife has not disclosed a cause of action and supporting evidence to support a cause of action such as would necessitate the joinder of those parties;(3)The wife has failed to particularise a claim to enable the entities to respond; and(4)Given that the proceeding is listed for trial commencing 24 October 2022, the joinder of these third parties is likely to jeopardise that hearing date, and is another reason that the application should be refused.